Wednesday – November 2, 2022
It’s Fed day! The central bank is expected to raise the short-term Fed Funds Rate by 75bp, lifting the Fed Funds Rate to a range of 4.00 to 4.25%.
What is most important for the markets is what the Fed will suggest about the size of future rate hikes and any words on the balance sheet reduction.
As we wrote yesterday, sentiment surrounding whether or not the Fed will temper its rate-hike stance in December has changed daily and the bond markets pine for a dovish signal. We think the Fed should “step down” or make smaller hikes going forward for the simple reason that we will see the Fed Funds Rate increase by 3.50% or so in the second half of this year. Let’s allow those hikes to seep into the economy before doing more large rate hikes.
The Fed statement will be released at 2:00 p.m. ET. Fed Chair Powell will hold a press conference at 2:30. Remember, there will be reactions to each of these events and the more forceful reaction could come tomorrow morning after markets get to sleep on the news.
The Bank of England is set to raise its benchmark rate by .75% tomorrow morning and is yet another headline risk for us. What they say about the future, etc. could have a big effect on global yields.
Technically, the FNMA 30-year 6% hit resistance one (R1) at 101.0 yesterday and backed off and is now below that level. The 10-year yield is 4.05%.
Let’s float to the Fed Meeting and be ready to lock at that point. Be mindful that we will see a knee-jerk reaction and it could be a sharp move. Look for text messaging and videos during this volatile time.
Courtesy of Mortgage Market Guide
-CHECK US OUT ON SOCIAL-
Tuesday – November 1, 2022
Sentiment surrounding whether or not the Fed will temper its rate-hike stance in December has changed daily and this morning the bond markets pine for a dovish signal from the central bank … prices are up, yields are lower.
There are many reasons for the Fed to “step down” the size of future rate hikes. MMG feels they will suggest rate hikes in the future will be smaller, as they should be. However, this doesn’t mean it will happen. The Fed has surprised us a lot over the years and in the past 12 months, they have been shockingly off base with forecasts, guidance and rhetoric. Bottom line – this is a classic, “Let’s hope for the best and prepare for the worst.”
The Fed meeting kicks off later this morning and ends with the release of the monetary policy statement tomorrow at 2:00 p.m. ET.
Ahead of the Fed statement, ADP Private payrolls will be delivered tomorrow morning. The October ISM Manufacturing Index is at 10:00 this morning.
Mortgage Bonds are higher as the 10-year yield has fallen below 4% to 3.96%. Stocks are in positive territory as they also look for less aggressive rate hikes. As yields fall, tech giants like Amazon, Alphabet and Microsoft are in rally mode.
Technically, the FNMA 30-year 6% has risen to resistance one (R1) at 101.0. The 10-year yield is 3.93%.
At this point, you may wish to try and float what you can to the Fed Meeting tomorrow and be mindful of the multiple reactions.
Courtesy of Mortgage Market Guide
-CHECK US OUT ON SOCIAL-
